DCIT, Ludhiana V. M/s Avinash Khosla & Associates, Ludhiana

ITA 1437/CHANDI/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1273 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Unexplained cash credit; Gift; Set aside
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1437/CHD/2010 ASSESSMENT YEAR: 2007-08 THE DCIT, VS M/S AVINASH KHOSLA & ASSOCIATES, CIRCE VII, ARCHITECTS, LUDHIANA LUDHIANA PAN NO. AAFFA1335K (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI RESPONDENT BY: SHRI ASHWANI KUMAR ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF CIT(A),-II, LUDHIANA DATED 29.10.2010 RELATING TO ASSESSMENT YE AR 2007-08 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. A CT, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN DELETING THE ADDIT ION OF RS. 5,30,970/- MADE ON ACCOUNT OF CASH CREDITS INTRODUCED IN THE CAPITAL ACCOUNTS OF THE PARTNERS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-II LUDHIANA HAS ERRED IN DELETING THE ADDITI ON OF RS. 9,78,074/- MADE BY THE ASSESSING OFFICER OUT OF TOTAL EXPENSE OF RS. 39,12,298/-. 3. THAT THE ORDER OF LD. CIT(A), LUDHIANA BE SET ASIDE AND THAT OF ASSESSING OFFICER BE RESTORED. 2 3. THE GROUND NO.1 RAISED BY THE REVENUE IS IN CONN ECTION WITH THE INTRODUCTION IN THE CAPITAL ACCOUNT OF THE PARTNERS . BOTH THE PARTNERS DURING THE YEAR UNDER CONSIDERATION HAD INTRODUCED SUM OF RS. 5,70,0000/- AS THEIR CAPITAL CONTRIBUTION AND THE S OURCES OF ADDITION WERE EXPLAINED DATE WISE BY THE CASH FLOW STATEMENT FILE D FROM THE INDIVIDUAL BOOKS OF ACCOUNT MAINTAINED BY THE PARTNERS SHRI AV INASH KHOSLA AND SHRI KANAV KHOSLA. THE ASSESSING OFFICER WAS OF TH E VIEW THAT IN THE ABSENCE OF THE SPECIFIC SOURCE OF RECEIPT OF CASH, THE SOURCE OF INTRODUCTION OF CASH IN THE CAPITAL ACCOUNT OF THE PARTNERS WAS NOT PROVED WITH CONCRETE DOCUMENTARY EVIDENCE, AND HENCE AN AD DITION OF RS. 5,30,976/- WAS MADE. THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE IN VIEW OF THE EXPLANATION FILED THAT BOTH THE PARTNER S BEING OLD ASSESSEES IN THE SAME WARD AND BOTH PARTNERS HAVING PROVED TH EIR INVESTING CAPACITY. THE ADDITION OF RS. 5,30,970/- WAS DELE TED BY THE CIT(A). 4. THE ASSESSEE BEFORE US HAS FURNISHED ON RECORD T HE COMPUTATION OF INCOME FURNISHED BY BOTH THE PARTNERS AND THE PARTI CULARS OF THEIR BEING ASSESSED TO TAX ALONG WITH THE DAILY CASH FLOW STAT EMENT MAINTAINED BY THEM INCLUDING THE COPY OF ACCOUNT OF THE PARTNERS IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FIRM. THE PARTNERS HAVE AC CEPTED TO HAVE ADVANCED THE SAID AMOUNT TO THE FIRM. 5. THE HON'BLE HIGH COURT IN CIT V RAMESHWAR DASS S URESH PAL CHEEKA [208 CTR (P&H 459) (P&H)] HAD CONFIRMED THE ORDER OF TRIBUNAL WHEREIN THE TRIBUNAL HAD ACCEPTED THE PLEA OF THE A SSESSEE THAT ONCE THE PARTNERS HAVE ACCEPTED HAVING MADE THE DEPOSIT, NO ADDITION CAN BE MADE IN THE INCOME OF THE FIRM. THE HON'BLE HIGH COURT FURTHER HELD THAT NO CASE WAS MADE OUT FOR ADDITION TO THE INCOME OF THE FIRM EVEN IF DEPOSITS 3 MADE WITH THE FIRM BY THE PARTNERS WERE UNEXPLAINED INCOME OF THE PARTNERS. THE JURISDICTIONAL HIGH COURT IN CIT V METAL & METALS OF INDIA [208 CTR 457 (P&H)] HAD HELD THAT WHERE THE P ARTNERS HAD ADMITTED HAVING MADE THE DEPOSITS WITH THE FIRM, AS FAR AS T HE FIRM IS CONCERNED, EVEN IF THE GIFT CLAIMED TO HAVE BEEN RECEIVED BY T HE PARTNERS IS TO BE REJECTED, THE SAID PARTNERS MAY BE LIABLE TO BE TAX ED BY TREATING THE SAID AMOUNT AS UNDISCLOSED INCOME, BUT THE FIRM CANNOT B E SUBJECTED TO TAX ON THAT GROUND. 6. FOLLOWING THE ABOVE SAID RATIOS LAID DOWN BY THE JURISDICTIONAL HIGH COURT, WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) IN THIS REGARD THAT ONCE THE PARTNERS HAVE ACCEPTED TO HAVE MADE T HE CAPITAL INTRODUCTION TO THE ACCOUNTS OF THE ASSESSEE FIRM, THERE IS NO M ERIT IN TREATING THE SAME AS UNEXPLAINED CREDIT IN THE HANDS OF THE FIRM. T HE GROUND NO.1 RAISED BY THE REVENUE IS THUS DISMISSED. 7. THE ISSUE IN GROUND NO.2 IS IN CONNECTION WITH T HE DISALLOWANCE OF PART OF THE EXPENSES CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER SHOW CAUSED THE ASSESSEE IN RESPECT OF THE INDIVIDU AL INCOME SHOWN FROM PROFESSION BY THE PARTNERS IN THEIR RESPECTIVE HAND S, AS TO WHY THE PROPORTIONATE EXPENSES CLAIMED IN THE FIRMS HAND B E NOT DISALLOWED AS THE ASSETS OF THE FIRM HAD BEEN UTILIZED TO EARN TH E INCOME IN THE HANDS OF THE INDIVIDUAL. THE PARTNERS HAD INDIVIDUALLY SHOW N INCOME OF RS. 1,92,000/- (KANAV KHOSLA) AND RS. 98,000/- (AVINASH KHOSLA) FOR PROVIDING CONSULTANCY SERVICES. THE EXPLANATION OF THE ASSESSEE WAS THAT THE PETTY CONSULTANCY WERE PROVIDED BY THE INDIVIDU AL PARTNERS IN THE FIELD OF INTERIOR DESIGNING, FURNISHING AND FURNITURE SUI TABILITY AND CHANGES AS PER VASTU, AS AGAINST ARCHITECTURAL SERVICES I.E. P ROJECT SERVICES, VALUATION 4 SERVICES FOR THE DEVELOPMENT AND CONSTRUCTION OF PR OJECTS OF STATE AND CENTRAL GOVERNMENT BEING PROVIDED BY THE ASSESSEE F IRM. THE ASSESSING OFFICER DISALLOWED 25% OF THE EXPENDITURE CLAIMED B Y THE ASSESSEE AS BEING RELATABLE TO THE INCOME EARNED BY THE PARTNER S AND MADE AN ADDITION OF RS. 9,78,074/-. THE CIT(A) DELETED THE SAME OBSERVING THAT THE PARTNERS WERE PROVIDED PETTY CONSULTANCY SERVICES A ND WERE NOT UTILIZING THE INFRASTRUCTURE OF THE FIRM. FURTHER, THE CIT( A) NOTED THE FACT THAT THE SAME ASSESSING OFFICER HAD ACCEPTED ALL THE EXPENSE S COVERED UNDER FRINGE BENEFIT TAX VIDE ORDER U/S 115WE(3) OF THE I .T. ACT DATED 8.12.2009. THE ADDITION MADE ON ADHOC BASIS WAS D ELETED BY CIT(A). WE ARE IN CONFORMITY WITH THE ORDER OF CIT(A) THAT IN THE ABSENCE OF ANY EVIDENCE BEING BROUGHT ON RECORD TO JUSTIFY THAT TH E PARTNERS OF THE ASSESSEE FIRM HAD UTILIZED THE INFRASTRUCTURE OF TH E FIRM, THERE IS NO MERIT IN THE AFORESAID ADDITION, SPECIALLY IN VIEW OF THE ORDER PASSED BY THE SAME ASSESSING OFFICER IN RESPECT OF THE SAME EXPEN DITURE BEING COVERED UNDER FRINGE BENEFIT TAX. UPHOLDING THE ORDER OF CIT(A), WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVENUE. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF MARCH, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 TH MARCH, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 5